Cluster Based SME Development · Cluster Development · Developing SME Clusters in Bangladesh · Economy of Bangladesh · SME Cluster Development · SME Cluster Development in Bangladesh · SME Clusters in Bangladesh

Government’s role in industrial cluster development

Government’s role in industrial cluster development


Md. Joynal Abdin

The Daily Sun on February 7, 2016

Cluster development is considered as an effective tool for fostering economic growth. Industrial clusters are considered as one of the most effective mechanism for spurring income and employment growth especially by the micro, small and medium size enterprises. Industrially developed or progressing countries have separate policy for industrial cluster development. But in Bangladesh industrial cluster development concept is comparatively a newer one. Previously the government was considering Export Processing Zone (EPZ), Special Economic Zone (SEZ) as a means for promoting export and industrialisation. EPZ concept has many success stories in Bangladesh. But their scope is very limited and expensive for countrywide industrialisation. On the other hand SEZ concept is still in the conceptual stage in Bangladesh.

Michel Porter, father of the industrial cluster concept defines a cluster as a ‘geographically proximate group of interconnected companies, suppliers, service providers and associated institutions in a particular field, linked by externalities of various types’. In Bangladesh, SME Foundation has defined (for the 1st time) SME cluster as ‘a cluster having a concentration of 50 or above enterprises producing similar products or services and is situated within an adjoining geographical location of 5-kilometer radius and having a common set of strengths, weaknesses, opportunities and threats’.

There are 177 naturally grown SME Clusters allover Bangladesh that developed on the basis of availability of raw materials, skilled manpower and indigenous technical knowhow of local people. These clusters have passed a long way to create demand of their products in the existing market to build supply chain networks, linking up the enterprises horizontally or vertically based of their nature of businesses. Most advantageous position of the SME Clusters over EPZ or SEZ concept is that they have existence in every avenues of business of their own. The role of government or development agencies would be to identifying their growth barriers and addressing those in a proper way. It is very easier to provide industrial infrastructures in a particular location for 50 enterprises than same number of diverse enterprises. It is comparatively easier to create expertise of a half-known person than that of a newly-known or unknown one.

SME Clusters of Bangladesh are located in 51 districts with representatives from every region. Therefore, development of SME clusters could facilitate balanced development of the country and reduce people’s pressure on the cities especially Dhaka and other divisional towns. There are many promising and export potential clusters. They can be introduced with formal channels of doing international business. It is the government’s turn to take and implement a comprehensive SME Cluster Development Policy and deploy a dedicated regulatory body for cluster development. Previously many development partners, NGOs and government agencies like BSCIC, SME Foundation have undertaken cluster development initiative in a piecemeal basis. They have achievements as beginners but how long we will stay in the position of a beginner with this important national issue. We should have a dedicated specialised body or at least a strong team to actively look after SME Cluster development with cordial support from the highest authority of the country.

Why cluster development is so important? Industrial cluster is important because it includes not only the concentration of output producing enterprises, but also input suppliers, output buyers, various service providers and in some cases government and non-governmental institutions. It provides a competitive but mutually beneficial environment for the enterprises to become more competitive and profitable. It reduces amount of investment of a particular entity, offers different segmental inputs and output of a product’s value chain. Availability of inputs, specialised labour and various services in a cluster helps in reducing costs of doing business within clusters. Internal competition ensures specialisation of labours and improved quality of products.

Naturally grown cluster is a widely available phenomenon in every type of economy in a developing or a developed country. High-tech industry cluster of Bangalore in India, the wine cluster in Chile and the Sialkot surgical instruments cluster in Pakistan are examples of many naturally grown clusters. Cluster development policy can be upgraded through supplying local and regional services that cannot be provided by the market itself. Cluster development policy can focus on identification and analysis of naturally grown industrial clusters, collection of updated information about problems and prospects of each cluster, cluster development action plan, proper monitoring and evaluation mechanism, sustainability mechanisms and internationalisation or local network etc.

Ministry of industries should take initiatives for enacting a cluster development policy. The National Committee for Industrial Development can play role as a facilitator. The BSCIC, SME Foundation, Bangladesh Bank, BITAC, BCSIR etc. can be the stakeholder organisations for cluster development. We should remember that piecemeal activities of different organisation cannot substitute a dedicated body for cluster development. The government should establish a dedicated body for cluster development like BEPZA or establish a specialised department in SME Foundation or BSCIC or the Prime Minister’s office to look after the cluster development issue effectively. Cluster development should be one of the most priority issues for the government for generating employment, creating self-employment opportunities and entrepreneurship development, increasing GDP growth, revenue earnings and reducing poverty in the country.

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